Tax On Your Profits
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There are two ways to make money from owning shares: From the dividends and/or an increase in share price. These are taxed differently. Here's our guide to what you need to know...
Tax on profits from selling shares
If you sell shares for more than you bought them for, you make money (woohoo!). This is called a capital gain and will be taxed at 20% (or 10% for basic-rate tax payers). But, the first £11,300 of capital gains each year are tax-free (phew!). Above this you’ll pay tax depending on which income band you’re in. See below...
| Your income band | Tax rate on capital gains over £11,000 |
| Basic Rate (earning £11,851 to £46,350) | 10% |
| Higher Rate (earning £46,351 to £150,000) | 20% |
| Additional Rate (earning over £150,000) | 20% |
MOXI top tip: Capital gains tax is applied to many things not just your profit from the sale of shares. See HMRC's full list.
Tax on dividends
You won’t pay tax on the first £2,000 of dividends each year (this has been lowered from £5,000 in the last tax year). Above this you’ll pay tax depending on which income band you’re in. See below...
| Your income band | Tax rate of dividends over £5,000 |
| Basic Rate (earning £11,851 to £46,350) | 7.5% |
| Higher Rate (earning £46,351 to £150,000) | 32.5% |
| Additional Rate (earning over £150,000) | 38.1% |
MOXI top tip: If you own a company or have a good share package with your job, speak to an accountant for the best solution.
Can I avoid paying tax once my yearly allowance is reached?
Yes. If you own shares through investments and expect to earn more than £11,300 in capital gains or more than £2,000 in dividends each year you might want to consider a Stocks & Shares ISA. This account is available with your bank or an online broker and it lets you make investments without being taxed on the profits.